Sixty-seven percent of U.S. adults say their next paycheck is essential to paying their bills, according to PYMNTS Intelligence, which published its findings yesterday on how those households decide what to cut when budgets tighten.
The firm surveyed consumers about 22 spending categories, ranging from mortgages, insurance and cars to childcare, student loans, subscriptions, lunches out and travel. Respondents classified each expense as essential, discretionary or a spending choice that still feels necessary.
Among paycheck-to-paycheck households, 41% attributed their status to day-to-day spending, 31% to recovering from a short-term shock such as a job loss, medical bill or major repair, and 28% to long-term commitments involving housing, education, childcare, family support or debt.
Roughly a third of households in the first two groups reported having nothing left to cut. Among those households, about half of the few still paying for private school said they could reconsider the expense. More than four in 10 said the same about childcare, and about four in 10 about student loans. By contrast, among households that still report room in the budget, two-thirds called private school essential and half said the same of childcare.
Households citing long-term commitments reported a median income of $92,500, and more than a third earn at least $150,000. Only 6% to 12% of that group called childcare, private school or student debt discretionary. The group’s median savings cushion was 7.4 weeks, though nearly three in 10 reported two weeks or less. PYMNTS said half of consumers earning $100,000 or more live paycheck to paycheck.
Self-reported flexibility tracked with actual behavior. Thirty-one percent of consumers who said they had quite a bit or a great deal of budget flexibility cut spending meaningfully last quarter, compared with 9% of those reporting very little or none.
PYMNTS also cited its Wage to Wallet Index, which found nearly a third of hourly workers incur late fees, overdrafts or penalty interest at least monthly, at roughly $50 a month or $600 a year. Grocery prices are about a third higher than in January 2020, according to the Bureau of Labor Statistics food-at-home index cited in the report.
